In a recent short opinion, the Ninth Circuit held that the California statute precluding insurance coverage for loss caused by a willful act bars coverage for the underlying malicious prosecution claim even though the claim settled and there was no adjudication that the alleged willful act took place. For reasons set out below, I believe the court’s interpretation of the statute –-even though apparently well-grounded in established authority — goes beyond the statute’s purpose and plain language and produces a result that undermines the very purposes of the insurance policy. The Ninth Circuit’s March 15, 2023, opinion can be found here. A March 22, 2023 post on the Wiley Law Firm’s Executive Summary Blog about the decision can be found here.

Continue Reading Adjudication Not Required for California’s Statutory Willful Act Coverage Preclusion

The collapse of Silicon Valley Bank is one of those singular events, charged with implications and fraught with dangerous possibilities, but that is also still so recent that it is difficult to discern what it ultimately will mean. Earlier this week, in an excellent webinar presented by the Rock Center for Corporate Governance at the Stanford Law School and entitled “Silicon Valley Brawl: Litigation, Accounting, and Regulatory Implications of SVB’s Collapse,” Stanford Law Professors Joseph Grundfest and Colleen Honigsberg and University of California Berkeley Law Professor Robert Bartlett took a detailed look at the causes and potential consequences SVB’s failure. This presentation, a video recording of which may be found here, is excellent, and the accompanying slides, which may be found here, make for indispensable reading for anyone who wants to try to understand what happened at SVB and what it might mean from a legal, financial, and regulatory standpoint. My thanks to the Rock Center and Stanford Law School for permission to link here to the webinar recording and to the slides.

Delaware’s courts traditionally have said that breach of the duty of oversight claims (sometimes referred to as Caremark claims) are “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.” However, in series of cases following the Delaware Supreme Court’s 2019 decision in Marchand v. Barnhill, Delaware courts have sustained a number of breach of the duty of oversight claims. More recently, Vice Chancellor Laster, in a pair of decisions in the McDonald’s case, elaborated significantly on the reach of duty of oversight. Among other things, Laster made it clear that the duty extends to corporate officers as well as to directors. Some commentators (including me) were concerned that Laster’s elaborations could lead to further lawsuits alleging breach of the duty of oversight.

Now, in what is the first high-profile post-McDonald’s Caremark claim of which I am aware, a group of four institutional investors has brought a breach of the duty of oversight claim against certain directors and officers of Meta, alleging that the executives failed to take sufficient action with respect to allegations that the company’s social media sites were being used for human trafficking. The new complaint appears to have been shaped to reflect many of the implications arising from Laster’s decisions in the McDonald’s case. A copy of the redacted public version of the plaintiffs’ March 20, 2023, complaint in the Meta case can be found here.

Continue Reading Meta Board and Execs Hit with Oversight Duty Breach Claim Based on Trafficking Allegations
Planet Earth

Many readers may have seen that earlier this week, President Biden made his first use of his Presidential veto powers to block a Congressional measure that would have reinstated Trump-era Labor Department ban on retirement plans considering factors such as climate change, social impacts or pending lawsuits when making investment choices. However, readers may not have seen that last week, in apparent anticipation of the Presidential veto, a group of governors of 19 states announced that they had formed an alliance, led by Florida Governor Ron DeSantis, to “push back against President Biden’s environmental, social, and corporate governance agenda that is destabilizing the American economy and the global financial system.”

The 19 state governors issued a joint statement that further explained their reasoning for forming the alliance. The March 16, 2023, press release from Governor DeSantis’s office about the alliance can be found here. The March 16, 2023, joint statement of the governors can be found here. A March 21, 2023 memo from the Cadwalader law firm about the governors’ alliance can be found here. The details of the Department of Labor guidelines, the Congressional measure, and President Biden’s veto are discussed in a March 20, 2023 post on The Nickel Blog, here.

Continue Reading Governors Form Alliance to Fight ESG

At the beginning of the year, when I surveyed the D&O claims landscape and predicted the factors that I thought might drive D&O claims volume in 2023, one set of factors I projected might make significant contributions to the number of claims to be filed during the year were the number of macroeconomic challenges – for example, rising interest rates, economic inflation, labor supply disruption, and the war in Ukraine. The recent failure of Silicon Valley Bank and the ensuing securities litigation provides one illustration of how these macro factors can translate into D&O claims.

Now, in the latest illustration of these forces at work, investors have filed a securities lawsuit against the organic foods company United Natural Foods, following the company’s recent disappointing earnings announcement in which the company disclosed a decline in profitability, despite increasing sales, due to inflationary pressures. A copy of the March 20, 2023, lawsuit against United Natural Foods can be found here.

Continue Reading Inflation Hits Organic Food Company’s Quarterly Results, Draws Securities Suit

The opioid crisis in the United States is not a new development; sadly, it has been around for years, as has D&O litigation relating to the crisis. Indeed, more than five years ago, I published a post in which I noted the outbreak at the time of a number of opioid-related securities suits. Now, in the latest of these opioid-related securities suits to be filed, and in the wake of the U.S. Department of Justice’s filings of a complaint in intervention in an opioid-related False Claims action against the company, a securities class action lawsuit has now been filed against the pharmacy company, Rite Aid Corporation. The March 20, 2023, Rite Aid complaint can be found here.

Continue Reading Rite Aid Hit with Opioid-Related Securities Suit

       

The securities class action lawsuits filed last week against failing or troubled banks felt as if the plaintiffs’ attorneys filing the suits were typing their complaints directly from the text of the day’s newspapers. Another suit filed last week referred to a slightly earlier but even more dramatic news story, the tragic train derailment in East Palestine, Ohio, of a Norfolk Southern freight train. The events surrounding the train disaster undoubtedly will be the subject of personal and environmental lawsuits for years to come. Now, the high-profile event is also the subject of a securities class action lawsuit, in the most recent example of the ways that operational events, rather than financial disclosures, increasingly can lead to securities litigation. A copy of the March 16, 2023, complaint can be found here.

Continue Reading Ripped from the Headlines: Norfolk Southern Hit with Securities Suit      

Scott Schechter
Paul Curley

Readers will recall that month when Cornerstone Research issued its annual report on securities class action lawsuit filings, the report showed that the number of crypto-related securities suits had soared, with 21 crypto-related suits filed in 2022, compared to only 11 in 2021. In the following guest post, Scott Schechter and Paul Curley take a look at this emerging new trend in securities class action lawsuit filings involving cryptocurrency and other digital asset-related securities suits. Scott and Paul are Partners in Kaufman Borgeest & Ryan’s Coverage Group in New York. I would like to thank Paul and Scott for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Paul and Scott’s guest post.

Continue Reading Guest Post: Crypto is the New Frontier in Securities Fraud Litigation

Earlier this week, securities class action lawsuits were filed against the recently failed U.S. banks, Silicon Valley Bank and Signature Bank. The turmoil that surrounded those banks’ failure sent ripples into the global banking industry; one of the institutions particularly affected by the ensuing turbulence was the European banking giant, Credit Suisse. After a series of events at the bank earlier this week (described below), the company’s share price tanked, the Swiss banking regulator extended the bank a financial lifeline – and the bank was hit with a securities class action lawsuit, the third this week involving a bank caught up in the sudden wave of banking industry disorder. The new lawsuit filed on March 16, 2023, against Credit Suisse can be found here.

Continue Reading Now It’s Credit Suisse’s Turn: Swiss Bank Hit with Securities Suit

On March 9, 2023, the SEC announced that it had settled charges that data management software company Blackbaud, Inc. had settled charges that the company’s cybersecurity disclosure policies and procedures violated the agency’s public company disclosure reporting requirements and that the company had made misleading disclosures about a 2020 ransomware attack that impacted more that 13,000 of its customers. The company, which neither admitted or denied the charges, agreed to a cease-and-desist order and to pay a $3 million penalty. The action, which follows a similar proceeding involving cybersecurity disclosures and procedures, highlights the agency’s focus on cybersecurity-related disclosures.

Continue Reading SEC Charges Company Over Disclosures Concerning Ransomware Attack